Consumer Price Index (CPI) rose again in September. According to the latest government data on October 12, retail inflation increased to 7.34% in September as compared to 6.69% inflation in August. Inflation has been more than what many agencies estimate, which is bad news.
This level of inflation is more than the limit of RBI. The common man’s pocket is killed the most. While food price inflation is around 10.68%, inflation of vegetables has crossed the 20% level. Inflation of pulses has also increased at an average of about 15%.
Today also figures of Index of Industrial Production (IIP) have come. It has seen a slight improvement. IIP was negative at 10.4% in July, which has now come down to -8%. But the thing to keep in mind is that even after opening the entire economy in unlock, it still cannot come in positive and is not visible even after coming.
Inflation beyond RBI limit
RBI has kept the inflation limit at 4% (+ – 2%). Means 2% below 4% level and 2% above can be inflation but if it goes beyond it then it will cross the limit and cross the danger mark. But now inflation has gone beyond 7% and obviously it has become a matter of concern for RBI.
The retail inflation data for September was much higher than what the economists had estimated on inflation. Reuters had estimated that inflation could be 6.88% but in reality it was 7.34%.
- Combined food price inflation increased from 9.05% to 10.68%
- Vegetable inflation rose from 11.41% to 20.73%
- Fuel and electricity inflation declined from 3.10% to 2.87%
- Housing inflation down to 2.83% from 3.10
- Clothing and footwear inflation rose from 2.77% to 3.04%
- Inflation of cereals reduced from 5.92% to 4.68%
- Inflation of pulses increased from 14.44% to 14.67%
EMI lowered expected
The RBI determines its monetary policy by keeping inflation within its target. Since the inflation figures have been much higher than expected, now the Reserve Bank will also show strictness in its monetary policy. The speculations that are being made to reduce the interest rates are now less likely that the Reserve Bank will reduce the interest rates. Its effect will also be on your pocket that if you were expecting EMI to be low then it seems difficult now.
Some recovery in IIP, but still negative
The index of industrial production (IIP) also remained negative. According to -10.4% IIP in July, the figure of -8% IIP has been in August. In the economy, fast relief is being provided through unlock, but it is not showing any significant effect. The growth figures still remain in the negative.
- Mining Sector Growth -9.8%
- Manufacturing sector growth -8.6%
- Electricity growth -1.8%
- Primary Goods Growth – 11.1%
- Capital Goods Growth-15.4
- Intermediate Goods Growth -6.8%
- Infra Goods Growth – 2.3%
- Consumer durable growth -10.3%
- Consumer non-durable growth – 3.3%
